On Demurrage (negative interest) – Reply to Albert Wenger

Published: February 14, 2017

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This post is a long comment on Albert Wenger’s post about Money as Commons (and if both our sites were powered with IndieWeb abilities then I would have been able to comment on his site and have the comment automatically posted in my own site).

Demurrage in Nature – Decay

If I was a grain farmer and I was left with unused / unsold stocks it would be a natural imperative for me to find something to do with the grains because they will eventually spoil. This is the natural state of everything. Plants, animals, people, buildings, societies, radioactive materials, ideas … everything decays.

Flow needs Debt (not money)

If I were that farmer with spare grains, instead of waiting for them to spoil I could, for example, bake breads. But there is only so much bread I can eat, so I could give that bread to my friends and family and sometime in the future, they could repay me with something they have and I need. There would be a standing debt between us.

Modern economics is founded on a story. It says that originally one farmer traded with another farmer 30 chickens for a cow. Introducing money supposedly made that transaction easier because sometimes a cow farmer needed a chicken without having a spare cow to trade.

According to David Graeber in Debt: The First 5000 years, this narrative is false and unsupported by anthropological findings. Ancient transactions, he suggests, were rarely so definite and atomic when I had spare grains (in summer or fall) I gave some to my neighbor to feed his pig and later in the year (in winter) when he butchered the pig he could repay me in meat. A key element in this transaction was the debt that remained. That debt was the foundation of a relationship between the two farmers. Such a constant flow of debts created community.

In our modern times, when I walk into a store, pick up and item and pay a cashier for it, the transaction is completed. I do not owe anybody anything and nobody owes me anything … and we’ve gotten used to that … and we like it. But with that we also lose the social fabric that connects us. We don’t owe anybody anything and nobody owes us anything. We do not need to relate.

It is interesting to note that dominant and popular technologies are in alignment with this trend. If the interaction with a cashier is low on the “relationship” scale then what will an Amazonian future (with no cashier or drones descending with produce out of the sky) look like? It seems that the more standardized/efficient/automated we get the more relationship we drain out of our lives and consciousness.

Money Defies Decay

All money (as we currently know it) is created carrying interest (the interest itself not created!). Interest demand growth. If I get a loan for $1000, it is because who ever is loaning me that money expects me to pay back $1050 … and we have the growth imperative. But more importantly, we have created money that opposes decay … and as money intermediates almost everything … there is an inherent conflict between how money works and how everything else works … and so we find ourselves living in a world where money requires infinite growth from a physically finite world (see climate change).

We’ve been forcing our money ideology onto the world for some time now, but the world seems to be pushing back … and interest rates around the world are hovering around zero (and growth seems to be headed in a similar direction).

Obstacles Preventing Flow

It seems to me that the way negative interest is currently being introduced is as an external force applied to a system that isn’t flowing well. It is like attaching a powerful pump to a o clogged system and hoping that, by sheer force, it will unclog the system and cause flow.

This approach seems to be denying that, if to use the metaphor of flow, there are obstacles that are preventing flow – these obstacles are like entangled and knotted arteries. Their entanglement is locked in tightly because they are holding up against massive pressures already. To enable better flow the obstacles to flow must be removed (or at least improved). Applying more pressure will not remove the obstacles, but force the flow to find other bypasses … or to rupture.

It may very well be that some of the obstacles to good money flow are in our money creation and banking systems. But there are subtle (can be easy to overlook) obstacles embedded inside each and every one of us. It isn’t gong to be enough to change the mechanics of money (such as negative interest). We are also going to have to address personal and social change. If we are to experience flow again we will need to reconnect with each other, to experience relationships, to relearn community.

If we come at this with a forceful mechanistic approach (the illusion that this is a system which we can control by pushing some buttons). If we focus on changing one thing (such as negative interest) we will be doing ourselves a double-injustice. The first is simple and direct – it won’t work, it won’t produce the results we expect it to. The second is is more subtle, more deep and more dangerous … we will falsely conclude that “negative interest” does not work and recovering from that will be even more difficult.

What about Venture Capital

I raise this point as a question/reflection to Albert because I believe that if we are to truly relate to these changes (as more than theoretical ideas) we need to look closely at our own reality and see where they effect our lives, our work, our livelihood, our beliefs.

How do the current models of venture capital relate to all this?

What aspects of venture capital are aligned with flow and what aspects are aligned with the extractive nature of interest-bearing-money?

Can venture capital be of better service and better aligned with economies and societies of flow

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